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Sales

EN BANC
G.R. No. L-11491

August 23, 1918

ANDRES QUIROGA, plaintiff-appellant,


vs.
PARSONS HARDWARE CO., defendant-appellee.

Facts: Quiroga and Parsons entered into the following contract:


CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J.
PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE
EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan
Islands to J. Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment
in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the
invoices, shall make and allowance of a discount of 25 per cent of the invoiced prices, as
commission on the sale; and Mr. Parsons shall order the beds by the dozen, whether of the same
or of different styles.
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(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.
ART. 2. In compensation for the expenses of advertisement which, for the benefit of both
contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the
obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the
exclusive agency for any island not comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds
in all the towns of the Archipelago where there are no exclusive agents, and shall immediately
report such action to Mr. Quiroga for his approval.
Xxx
The plaintiff alleged that the defendant violated the following obligations: not to sell the beds at higher
prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to

keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order
the beds by the dozen and in no other manner.
With the exception of the obligation on the part of the defendant to order the beds by the dozen and in no
other manner, none of the obligations imputed to the defendant in the two causes of action are expressly
set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds
in Iloilo, and that said obligations are implied in a contract of commercial agency.

Issue: Whether or not Mr. Parsons by reason of the contract hereinbefore transcribed, was a purchaser
or an agent of the plaintiff for the sale of his beds.
Held:In order to classify a contract, due regard must be given to its essential clauses.In the contract in
question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to
furnish the defendant with the beds which the latter might order, at the price stipulated, and that the
defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by
the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to
their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in
cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed
for prompt payment. These are precisely the essential features of a contract of purchase and sale.These
features exclude the legal conception of an agency or order to sell whereby the mandatory or agent
received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains
from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it.
Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on
sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere
discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the
defendant was the only one that could sell the plaintiff's beds in the Visayan Islands.
In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the
contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the
defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right
and cannot complain for having acted thus at his own free will.

Sanchez vsRigos(ARJAY)
FIRST OPTIMA REALTY CORPORATION, petitioner, vs. SECURITRON SECURITY SERVICES,
INC., respondent. First Optima Realty Corporation vs. Securitron Security Services, Inc., 748 SCRA 534,
G.R. No. 199648 January 28, 2015
Facts:
Eleazar, GM of Securitron, wants to buy the land owned by First Optima. During a meeting between
Eleazar and Young, EVP of First Optima, Young did not agree to the offer of Eleazar because she has to

consult her sister and the approval of the Board for the transaction. Eleazar agreed that he will wait for the
Boards decision. While waiting for Youngs reply, Eleazar send a check of 100K and a letter containing
their supposed agreement of the sale of Land. The check and letter was left to the receptionist of First
Optima. Eleazar now wants to compel First Optima to consummate the supposed sale of the subject
property. Eleazar claims that the failure of Young to reply to the letter was deemed an acceptance of the
offer and the 100K is earnest money. The RTC and CA both agree that there was a perfected sale and
coupled with earnest money, Securitron is bound to deliver the land.
Issue:
Whether or not there was a perfected sale?
Is 100K considered a valid earnest money?
First Issue
No. It cannot be denied that there were negotiations between the parties conducted after the respondents
December 9, 2004 letter-offer and prior to the February 4, 2005 letter. These negotiations culminated in a
meeting between Eleazar and Young whereby the latter declined to enter into an agreement and accept
cash payment then being tendered by the former. Thus, the trial and appellate courts failed to appreciate
that respondents offer to purchase the subject property was never accepted by the petitioner at any
instance, even after negotiations were held between them. Thus, as between them, there is no sale to
speak of. When there is merely an offer by one party without acceptance of the other, there is no
contract.
The stages of a contract of sale are:
1. negotiation, starting from the time the prospective contracting parties indicate interest in the
contract to the time the contract is perfected;
2. perfection, which takes place upon the concurrence of the essential elements of the sale; and
3. consummation, which commences when the parties perform their respective undertakings under
the contract of sale, culminating in the extinguishment of the contract. In the present case, the
parties never got past the negotiation stage.
Nothing shows that the parties had agreed on any final arrangement containing the essential elements of a
contract of sale, namely,
1. consent or the meeting of the minds of the parties;
2. object or subject matter of the contract; and
3. price or consideration of the sale.
Second Issue:
No. Earnest money applies to a perfected sale. In a potential sale transaction, the prior payment of earnest
money even before the property owner can agree to sell his property is irregular, and cannot be used to
bind the owner to the obligations of a seller under an otherwise perfected contract of sale;
Young was under no obligation to reply to the February 4, 2005 letter. It would be absurd to require a
party to reject the very same offer each and every time it is made; otherwise, a perfected contract of sale
could simply arise from the failure to reject the same offer made for the hundredth time. Thus, said letter
cannot be considered as evidence of a perfected sale, which does not exist in the first place; no binding
obligation on the part of the petitioner to sell its property arose as a consequence. The letter made no new
offer replacing the first which was rejected. Since there is no perfected sale between the parties,
respondent had no obligation to make payment through the check; nor did it possess the right to deliver
earnest money to petitioner in order to bind the latter to a sale. As contemplated under Art. 1482 of the

Civil Code, there must first be a perfected contract of sale before we can speak of earnest money.
Where the parties merely exchanged offers and counter-offers, no contract is perfected since they did not
yet give their consent to such offers. Earnest money applies to a perfected sale.
In a potential sale transaction, the prior payment of earnest money even before the property owner can
agree to sell his property is irregular, and cannot be used to bind the owner to the obligations of a seller
under an otherwise perfected contract of sale; to cite a well-worn clich, the carriage cannot be placed
before the horse. The property owner-prospective seller may not be legally obliged to enter into a sale
with a prospective buyer through the latters employment of questionable practices which prevent the
owner from freely giving his consent to the transaction; this constitutes a palpable transgression of the
prospective sellers rights of ownership over his property, an anomaly which the Court will certainly not
condone. An agreement where the prior free consent of one party thereto is withheld or suppressed will be
struckdown, and the Court shall always endeavor to protect a property owners rights against devious
practices that put his property in danger of being lost or unduly disposed without his prior knowledge or
consent. As this ponente has held before, [t]his Court cannot presume the existence of a sale of land,
absent any direct proof of it.
G.R. No. L-31271 April 29, 1974
Romeo Martinez and Leonor Suarez vs CA
Justice Esguerra, ponente
FACTS
Spouses Romeo Martinez and Leonor Suarez are the registered owners of two (2) fishponds located in
Lubao, Pampanga. They acquired the lots after a series of transfers, but the title came originally from
Emilio Cruz de Dios.
Emilio acquired his title beforehand from Potenciano Garcia. Before Potenciano sold the lot to Emilio it
was the subject of a civil case where the Mayor of Lubao prevented Potenciano from constructing dikes
on the said fishponds. The court ruled in favor of Potenciano and this was annotated in the title of the lot.
Thus, from June 22, 1914, due to the construction of the dikes, the property in question remained closed
until a portion thereof was again opened just before the outbreak of the Pacific War.
When the title reached the spouses Martinez-Suarez, they encountered another dispute with the
Municipality of Lubao. The latter claimed that the fishponds were public rivers and not private property.
The spouses and the local government unit referred the dispute to the committee of Committee on Rivers
and Streams and the latter issued a decision declaring that the spouses Martinez-Suarez should have
exclusive ownership of the property. On the basis of this decision, the spouses constructed dikes around
the property.
After the dikes were constructed, the Department of Public Works and Communications, ordered another
investigation on the said parcel of land and later on directed the spouses to remove the dikes they had
constructed, on the strength of Republic Act No. 2056 entitled "An Act To Prohibit, Remove and/or
Demolish the Construction of Dams, Dikes, Or Any Other Walls In Public Navigable Waters, Or
Waterways. The RTC declared this order as null and void. CA reversed the RTC and ruled in favor of the
Department of Public Works and Communications.
ISSUES

1. Whether or not the CA improperly ordered the cancellation of the Torren Title pertaining to the
fishponds on the ground that the Spouses Martinez-Suarez were buyers in good faith. No.
2. Whether or not buyers of registered land need not go beyond the registry to determine the
condition of the property. No.
HELD
1. Appellants cannot be deemed purchasers for value and in good faith as in the deed of absolute
conveyance executed in their favor contained several restrictions (Provisions are in Spanish.
Cant translate. Sorry)
One who buys something with knowledge of defect or lack of title in his vendor cannot claim that
he acquired it in good faith (Leung Lee v. Strong Machinery Co., et al., 37 Phil. 664).
Before purchasing a parcel of land, it cannot be contended that the appellants who were the
vendees did not know exactly the condition of the land that they were buying and the obstacles or
restrictions thereon that may be put up by the government in connection with their project of
converting Lot No. 2 in question into a fishpond. Nevertheless, they willfully and voluntarily
assumed the risks attendant to the sale of said lot.
2. The ruling that a purchaser of a registered property cannot go beyond the record to make inquiries
as to the legality of the title of the registered owner, but may rely on the registry to determine if
there is no lien or encumbrances over the same, cannot be availed of as against the law and the
accepted principle that rivers are parts of the public domain for public use and not capable of
private appropriation or acquisition by prescription.

Mapalo vs Mapalo (LEAN)


G.R. No. L-21489 and L-21628, May 19, 1966
FACTS:
The spouses Miguel Mapalo and Candida Quiba were the registered owners of a residential land located
in Pangasinan. (1,635 sq. m.) The spouses donated the eastern half of the land to Miguels brother
Maximo Mapalo who was about to get married.
However, they were deceived into signing, on October 15, 1936, a deed of absolute sale over the entire
land in Maximos favor. Their signatures were procured by fraud because they were made to believe by
Maximo and the lawyer who acted as notary public who "translated" the document, that the same was a
deed of donation in Maximo's favor covering one-half of their land. (It must be noted that the spouses are
illiterate farmers).
Although the document of sale stated a consideration of Five Hundred (P500.00) Pesos, the aforesaid
spouses did not receive anything of value for the land. In 1938, Maximo Mapalo, without the consent of
the spouse, registered the sale in his favor.
After thirteen years (1951), he sold the land to the Narcisos, (Evaristo, Petronila Pacifico and Miguel)
who thereafter registered the sale and obtained a title in their favor.
In 1952, the Narcisos filed a complaint with the CFI to be declared owners of the entire land, for
possession of its western portion; for damages; and for rentals.
The Mapalo spouses filed a counterclaim seeking cancellation of the the Narcisos titles as to the western
half of the land. They said that their signatures to the deed of sale of 1936 was procured by fraud and that
the Narcisos were buyers in bad faith.
They also filed another complaint wherein they asked the court to declare deeds of sale of 1936 and of
1951 over the land in question be declared null and void as to the western half of said land.
CFI ruled in favor of the Mapalo spouses. Upon appeal filed by Narcisos, CA reversed the lower courts
ruling solely on the ground that the consent of the Mapalo spouses to the deed of sale of 1936 having
been obtained by fraud, the same was voidable, not void ab initio, and, therefore, the action to annul the
same, within four years from notice of the fraud, had long prescribed (From March 15, 1938). Hence, the
appeal.

ISSUES:
1. Whether or not the deed of sale executed in 1936 was null and void. YES
2. Whether or not the Narcisos were purchasers in good faith. NO

HELD:
1. The sale was void.
Starting with fundamentals, under the Civil Code, either the old or the new, for a contract to exist at all,
three essential requisites must concur: (1) consent, (2) object, and (3) cause or consideration.1 The Court
of Appeals is right in that the element of consent is present as to the deed of sale of October 15, 1936. For
consent was admittedly given, albeit obtained by fraud. Accordingly, said consent, although defective, did
exist. In such case, the defect in the consent would provide a ground for annulment of a voidable contract,
not a reason for nullity ab initio.
The parties are agreed that the second element of object is likewise present in the deed of October 15,
1936, namely, the parcel of land subject matter of the same.
Not so, however, as to the third element of cause or consideration. And on this point the decision of the
Court of Appeals is silent.
The rule under the Civil Code, again be it the old or the new, is that contracts without a cause or
consideration produce no effect whatsoever. Nonetheless, under the Old Civil Code, the statement of a
false consideration renders the contract voidable, unless it is proven that it is supported by another real
and licit consideration. And it is further provided by the Old Civil Code that the action for annulment of a
contract on the ground of falsity of consideration shall last four years, the term to run from the date of the
consummation of the contract. Accordingly, since the deed of sale of 1936 is governed by the Old Civil
Code, it should be asked whether its case is one wherein there is no consideration, or one with a statement
of a false consideration. If the former, it is void and inexistent; if the latter, only voidable, under the Old
Civil Code.
As observed earlier, the deed of sale of 1936 stated that it had for its consideration Five Hundred
(P500.00) Pesos. In fact, however, said consideration was totally absent. The problem, therefore, is
whether a deed which states a consideration that in fact did not exist, is a contract without consideration,
and therefore void ab initio, or a contract with a false consideration, and therefore, at least under the Old
Civil Code, voidable.
According to Manresa, what is meant by a contract that states a false consideration is one that has in fact a
real consideration but the same is not the one stated in the document.
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. 921, is squarely
applicable herein. In that case we ruled that a contract of purchase and sale is null and void and produces
no effect whatsoever where the same is without cause or consideration in that the purchase price which
appears thereon as paid has in fact never been paid by the purchaser to the vendor.

2. The Narcisos are not purchasers in good faith.

Aside from the fact that all the parties in these cases are neighbors, except Maximo Mapalo the foregoing
facts are explicit enough and sufficiently reveal that the Narcisos were aware of the nature and extent of
the interest of Maximo Mapalo their vendor, over the above-described land before and at the time the
deed of sale in their favor was executed.
The Narcisos were purchaser-in-value but not purchasers in good faith
What was the necessity, purpose and reason of Pacifico Narciso in still going to the spouses Mapalo and
asked them to permit their brother Maximo to dispose of the above-described land? To this question it is
safe to state that this act of Pacifico Narciso is a conclusive manifestation that they (the Narcisos) did not
only have prior knowledge of the ownership of said spouses over the western half portion in question but
that they also have recognized said ownership. It also conclusively shows their prior knowledge of the
want of dominion on the part of their vendor Maximo Mapalo over the whole land and also of the flaw of
his title thereto. Under this situation, the Narcisos may be considered purchasers in value but certainly not
as purchasers in good faith.

ParedesvsEspino (SHEY)
G.R. No. L-23351, March 13, 1968
FACTS:
Appellant Cirilo Parades had filed an action to compel defendant-appellee Jose L. Espino to execute a
deed of sale and to pay damages. The complaint alleged that the defendant "had entered into the sale" to
plaintiff of Lot No. 67 of the Puerto Princesa Cadastre at P4.00 a square meter; that the deal had been
"closed by letter and telegram" but the actual execution of the deed of sale and payment of the price were
deferred to the arrival of defendant at Puerto Princesa; that defendant upon arrival had refused to execute
the deed of sale altho plaintiff was able and willing to pay the price, and continued to refuse despite
written demands of plaintiff; that as a result, plaintiff had lost expected profits from a resale of the
property, and caused plaintiff mental anguish and suffering, for which reason the complaint prayed for
specific performance and damages.
Defendant filed a motion to dismiss upon the ground that the complaint stated no cause of action, and that
the plaintiff's claim upon which the action was founded was unenforceable under the Statute of Frauds.
Plaintiff opposed in writing the motion to dismiss and annexed to his opposition a copy of a letter
purportedly signed by defendant stating the transaction of sale between the two of them.

ISSUE: Whether or not enforcement of the contract pleaded in the complaint is barred by the Statute of
Frauds
HELD:
The Statute of Frauds, embodied in Article 1403 of the Civil Code of the Philippines, does not require that
the contract itself be in writing. The plain text of Article 1403, paragraph (2) is clear that a written note or
memorandum, embodying the essentials of the contract and signed by the party charged, or his agent,
suffices to make the verbal agreement enforceable, taking it out of the operation of the statute.
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases
an agreement hereafter made shall be unenforceable by action, unless the same, or some note or
memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence,
therefore, of the agreement cannot be received without the writing, or a secondary evidence of its
contents:
(e) An agreement for the leasing for a longer period than one year, or for the sale of real
property or of an interest therein.

In the case at bar, the complaint in its paragraph 3 pleads that the deal had been closed by letter and
telegram" (Record on Appeal, p. 2), and the letter referred to was evidently the one copy of which was
appended as Exhibit A to plaintiff's opposition to the motion dismiss. This letter, transcribed above in part,
together with that one marked as Appendix B, constitute an adequate memorandum of the transaction.
They are signed by the defendant-appellee; refer to the property sold as a lot in Puerto Princesa, Palawan,
covered, by TCT No. 62; give its area as 1826 square meters and the purchase price of four (P4.00) pesos
per square meter payable in cash. We have in them therefore, all the essential terms of the contract, and
they satisfy the requirements of the Statute of Frauds. We have ruled in Berg vs. Magdalena Estate, Inc.,
92 Phil. 110, 115, that a sufficient memorandum may be contained in two or more documents.

FIRST DIVISION
[G.R. No. 5295. December 16, 1909. ]
KUENZLE & STREIFF, Plaintiff-Appellant, v. MACKE & CHANDLER ET AL., DefendantsAppellees.

Facts: By virtue of an execution issued upon a judgment secured by the defendant Macke & Chandler,
against Stanley &Krippendorf, the Sheriff levied and caused the sale of personal properties worth P1,000
(bar, furniture and fixtures of Oregon Saloon Bar). Kuenzle claims ownership over the properties while
Chandler, the buyer in the auction, insists that the properties belong to Krippendorf. Apparently,
Krippendorf has sold the properties to Kuenzle but failed to deliver it. The sale was in a private
instrument and unrecorded.
Issue: Whether or not the private instrument of sale passed ownership of the properties to Kuenzle despite
lack of delivery.
Held: No.
The case of the Fidelity and Deposit Company against Wilson (8 Phil. Rep., 51) lays down a doctrine
which we think is decisive of this case. In that case it was held that the ownership of personal property
can not be transferred to the prejudice of third persons except by delivery of the property itself; and that a
sale without delivery gives the would-be purchaser no rights in said property except those of a creditor.
The bill of sale in the case at bar under the circumstances of this case, could have no effect against a
person dealing with the property upon the faith of appearances.
The case of Kunzle&Streiff against A.S. Watson & Co.cited by the appellant in its brief, does not sustain
its contention.That was a case of the sale of property upon the condition that the title thereto should
remain in the vendor until the purchase price thereof should be fully paid, and that, in case of nonpayment
of the debt or of any installment thereof when due, the vendor would have a right to take possession of the
property and deal with it as provided for in the contract. In that case the court held that such a contract for
the conditional sale of goods was valid in these Islands between the parties thereto, and was valid also as
to third persons, provided possession of the property therein described was taken by the vendor before the
rights of third persons intervened against the same. The bill of sale in the present case is clearly not a
conditional sale of property, and the plaintiff did not take possession of the properties in question.
The defendant Macke & Chandler, having purchased the property at an execution sale, properly
conducted, obtained a good title to the property in question as against the plaintiff in this case.

Sun Bros vs Velasco (ARJAY)


G.R. No. L-13125 February 11, 1919
ROSALIO BAUTISTA, plaintiff-appellee,
vs.
FRANCISCO SIOSON, ET AL., defendants.
RAYMUNDO DE LA CRUZ, appellant.
Facts:
Sioson sold his Camarin to Bautista with a right to repurchase within 2 years. The deed of sale was
notarized but it was not registered in the Registry of Deeds. Immediately after the sale, the Camarin was
leased to Sioson. After 1 year and 11 months, Sioson sold the Camarin to dela Cruz. The sale was also
notarized but it was not registered to the Registry of Deeds. When Bautista filed an action for his claim of
ownership over the Camarin, dela Cruz has the actual possession of the Camarin.
Issue:
Who has the better right to the Camarin?
Ruling:
Bautista since he took first possession of the property, the notarized deed of sale serves as a delivery. The
execution of a public instrument constitutes one of the kinds of symbolic tradition, but, in all the different
manners by which the thing sold may be delivered, it is necessary that the record bear proof and that it
may be held that such delivery or tradition was determined by the will of the parties to deliver and
receive, respectively, the thing that is the subject of the contract. The second sale has no effect since
Sioson cannot sell the property because he is not the owner.
In a case where a real property has been sold two or three times to different persons and the
corresponding deeds of sale do not appear to have been entered in the registry of property, the question as
to who is the lawful owner of such property, in accordance with the provisions of article 1473 of the Civil
Code, should be resolved in favor of the purchaser who first took possession of the property, pursuant to
the provisions of article 1462 of the same Code. (Old Civil Code)
In a case, which frequently occurs, where the vendor, on the same date on which the deed of sale is
executed, by means of a constitutumpossessorium agreement converts himself into a tenant or lessee of
the property that he sold, and continues in possession thereof as such tenant, the purchaser who acquired
the property through delivery or symbolic tradition, with all the consequent effects of a deed of
conveyance, is deemed to be in possession thereof by the express will of the contracting parties, and,
therefore, it must be recognized that, through such constitutumpossessorium agreement, the purchaser,
who by that covenant became the lessor, is in lawful possession of the leased property, and that the
vendor, by the same covenant, converted himself into the lessee and is in material possession of the leased
property in the name and representation of the purchaser, its lawful owner.
From what has been said, it "logically follows that the second purchaser who acquired the property from
the lessee or tenant and who, through the acts of the latter, entered into the material possession of the
property by virtue of the second sale, could not have acquired any right of ownership therein, inasmuch as
he .received the property, not from its lawful owner, but from a mere tenant or lessee who had no right

whatever to dispose of it; therefore, the second purchaser's possession is merely precarious and was taken
after the first purchaser had exercised his right of possession, and the possession of the second purchaser
cannot prevail over that previously obtained by the first purchaser.
G.R. No. L-21263 April 30, 1965
Lawyers Cooperative Publishing Company vsTabora
Justice Angelo Bautista
FACTS
On May 3, 1955, Perfecto A. Tabora bought from the Lawyers Cooperative Publishing Company one
complete set of American Jurisprudence consisting of 48 volumesplus one set of American Jurisprudence,
General Index, for a total price of f P1,682.40 including cost of freight. Tabora made a partial payment of
P300.00, leaving a balance of P1,382.40.
It was provided in the contract that "title to and ownership of the books shall remain with the seller until
the purchase price shall have been fully paid. Loss or damage to the books after delivery to the buyer
shall be borne by the buyer."
The books were duly delivered and receipted for by Tabora on May 15, 1955 in his law office Ignacio
Building, Naga City. After the delivery, the building where Taboras law office was burned.As a result, the
books bought from the company, together with Tabora's important documents and papers, were also
burned during the conflagration.Tabora notified the company of this incident. The company in turn, as a
token of goodwill, sent to Tabora free of charge volumes 75, 76, 77 and 78 of the Philippine Reports.
However, Tabora failed to pay he monthly installments agreed upon on the balance of the purchase price
notwithstanding the long time that had elapsed, the company demanded payment of the installments due.
Taborra failed to pay. The company commenced the present action before the Court of First Instance of
Manila for the recovery of the balance of the obligation plus payment of 25% of the amount due as
liquidated damages, and the cost of action.
Tabora denied liability for the loss on the ground of force majeure. RTC rendered a judgment in favor of
Lawyers Cooperative.
ISSUE
1. Whether or not the loss should be borne by Lawyers Cooperative since it was agreed that the title
to and the ownership of the books shall remain with the seller until the purchase price shall have
been fully paid (Owner bears the loss).
2. Whether or not Taborashould not answer for the loss since the same occurred through force
majeure.
HELD
1. No.

While as a rule the loss of the object of the contract of sale is borne by the owner or in case
of force majeure the one under obligation to deliver the object is exempt from liability, the
application of that rule does not here obtain because the law on the contract entered into on the
matter argues against it.
It is true that in the contract entered into between the parties the seller agreed that the ownership
of the books shall remain with it until the purchase price shall have been fully paid, but such
stipulation cannot make the seller liable in case of loss not only because such was agreed merely
to secure the performance by the buyer of his obligation but in the very contract it was expressly
agreed that the "loss or damage to the books after delivery to the buyer shall be borne by the
buyer."
Any such stipulation is sanctioned by Article 1504 of our Civil Code, which in part provides:(1)
Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance
of the contract and the ownership in the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract, the goods are at the buyer's risk
from the time of such delivery.
2. No.
Neither can appellant find comfort in the claim that since the books were destroyed by fire
without any fault on his part he should be relieved from the resultant obligation under the rule
that an obligor should be held exempt from liability when the loss occurs thru a fortuitous event.
This is because this rule only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in case of fortuitous event.
Here these qualifications are not present. The obligation does not refer to a determinate thing, but
is pecuniary in nature, and the obligor bound himself to assume the loss after the delivery of the
goods to him. In other words, the obligor agreed to assume any risk concerning the goods from
the time of their delivery, which is an exception to the rule provided for in Article 1262 of our
Civil Code.

Carumbavs CA (LEAN)
G.R. No. L-27587, February 18, 1970

FACTS: In 1955, the spouses Amado Canuto and Nemesia Ibasco, by virtue of a Deed of Sale of
Unregistered Land with Covenants of Warranty sold a parcel of land located in Camarines Sur, to the
spouses Amado Carumba and Benita Canuto, The referred deed of sale was never registered in the Office
of the RD of Camarines Sur, and the Notary was not then an authorized notary public in the place.
In 1957, a complaint for a sum or money was filed by Balbuena against Amado Canuto and Nemesia
Ibasco before the Justice of the Peace Court. A decision was rendered in favor of Balbuena and against the
defendants.
In 1968, the ex-officio Sheriff issued a Definite Deed of Sale of the property now in question in favor of
Balbuena, which instrument of sale was registered before the Office of the RD.
The CFI, finding that after execution of the document Carumba had taken possession of the land, and
planted thereon: declared him to be the owner of the property under a consummated sale; held void the
execution levy made by the sheriff, pursuant to a judgment against Carumbas vendor, Amado Canuto;
and nullified the sale in favor of the judgment creditor, Balbuena.
The CA, without altering the findings of fact made by the court of origin, declared that there having been
a double sale of the land subject of the suit Balbuenas title was superior to that of his adversary under
Article 1544 of the Civil Code of the Philippines, since the execution sale had been properly registered in
good faith and the sale to Carumba was not recorded.
ISSUE:
Whether or not Balbuena's title was superior to that of his adversary under Article 1544 of the Civil Code
of the Philippines, since the execution sale had been properly registered in good faith and the sale to
Carumba was not recorded.
HELD:
No. While under the invoked Article 1544 registration in good faith prevails over possession in the event
of a double sale by the vendor of the same piece of land to different vendees, said article is of no
application to the case at bar, even if Balbuena, the later vendee, was ignorant of the prior sale made by
his judgment debtor in favor of petitioner Carumba. The reason is that the purchaser of unregistered land
at a sheriff's execution sale only steps into the shoes of the judgment debtor, and merely acquires the
latter's interest in the property sold as of the time the property was levied upon. This is specifically
provided by section 35 of Rule 39 of the Revised Rules of Court, the second paragraph of said section
specifically providing that:

Upon the execution and delivery of said (final) deed the purchaser, redemptioner, or his
assignee shall be substituted to and acquire all the right, title, interest, and claim of the
judgment debtor to the property as of the time of the levy, except as against the judgment
debtor in possession, in which case the substitution shall be effective as of the time of the
deed ... (Emphasis supplied)
While the time of the levy does not clearly appear, it could not have been made prior to 15 April 1957,
when the decision against the former owners of the land was rendered in favor of Balbuena. But the deed
of sale in favor of Canuto had been executed two years before, on 12 April 1955, and while only
embodied in a private document, the same, coupled with the fact that the buyer (petitioner Carumba) had
taken possession of the unregistered land sold, sufficed to vest ownership on the said buyer. When the
levy was made by the Sheriff, therefore, the judgment debtor no longer had dominical interest nor any
real right over the land that could pass to the purchaser at the execution sale.1 Hence, the latter must yield
the land to petitioner Carumba. The rule is different in case of lands covered by Torrens titles, where the
prior sale is neither recorded nor known to the execution purchaser prior to the levy;2 but the land here in
question is admittedly not registered under Act No. 496.

Katigbakvs CA (SHEY)
G.R. No. L-16480, January 31, 1962
FACTS:
This case arose from an agreed purchase and sale of a Double Drum Carco Tractor Winch. Artemio
Katigbak upon reading an advertisement for the sale of the winch placed by V. K. Lundberg, owner and
operator of the International Tractor and Equipment Co., Ltd., went to see Lundberg and inspected the
equipment. The price quoted was P12,000.00. Desiring a reduction of the price, Katigbak was referred to
Daniel Evangelista, the owner. After the meeting, it was agreed that Katigbak was to purchase the winch
for P12,000.00, payable at P5,000.00 upon delivery and the balance of P7,000.00 within 60 days. The
condition of the sale was that the winch would be delivered in good condition. Katigbak was apprised that
the winch needed some repairs, which could be done in the shop of Lundberg. It was then stipulated that
the amount necessary for the repairs will be advanced by Katigbak but deductible from the initial
payment of P5,000.00. The repairs were undertaken and the total of P2,029.85 for spare parts was
advanced by Katigbak for the purpose. For one reason or another, the sale was not consummated and
Katigbak sued Evangelista, Lundberg and the latter's company, for the refund of such amount.
Lundberg and Evangelista filed separate Answers to the complaint, the former alleging non-liability for
the amount since the same (obligation for refund) was purely a personal account between defendant
Evangelista and plaintiff Katigbak.
Evangelista, on his part, claimed that while there was an agreement between him and Katigbak for the
purchase and sale of the winch and that Katigbak advanced the payment for the spare parts, he (Katigbak)
refused to comply with his contract to purchase the same; that as a result of such refusal he (Evangelista)
was forced to sell the same to a third person for only P10,000.00, thus incurring a loss of P2,000.00,
which amount Katigbak should be ordered to pay.
The lower court ruled in favor of Katigbak. However, on appeal the CA reversed the decision further
stating appellant Evangelista has right to recover from Katigbak his loss of P2,000.00, which is the
difference between the contract price for the sale of the winch between him and appellee and the actual
price for which it was sold after the latter had refused to carry out his agreement. Citing the case of
Hanlon, if the purchaser fails to take delivery and pay the purchase price of the subject matter of the
contract, the vendor, without the need of first rescinding the contract judicially, is entitled to resell the
same, and if he is obliged to sell it for less than the contract price, the buyer is liable for the difference.

ISSUE: Whether or not Evangelista can recover from Katigbak the loss of P2,000.00, which is the
difference between the contract price for the sale of the winch between him and Katigbak and the actual
price for which it was sold after the latter had refused to carry out his agreement.

HELD: YES! Quoting Hanlon case:


In the present case the contract between Hanlon and the mining company was executory
as to both parties, and the obligation of the company to deliver the shares could not arise
until Hanlon should pay or tender payment of the money. The situation is similar to that
which arises every day in business transactions in which the purchaser of goods upon an
executory contract fails to take delivery and pay the purchase price. The vendor in such
case is entitled to resell the goods. If he is obliged to sell for less than the contract price,
he holds the buyer for the difference; if he sells for as much as or more than the contract
price, the breach of contract by the original buyer is damnum absque injuria. But it has
never been held that there is any need of an action of rescission to authorize the vendor,
who is still in possession, to dispose of the property where the buyer fails to pay the price
and take delivery.
The facts of the case under consideration are identical to those of the Hanlon case. The herein petitioner
failed to take delivery of the winch, subject matter of the contract and such failure or breach was,
according to the Court of Appeals, attributable to him, a fact which We are bound to accept under existing
jurisprudence. The right to resell the equipment, therefore, cannot be disputed. It was also found by the
Court of Appeals that in the subsequent sale of the winch to a third party, the vendor thereof lost
P2,000.00, the sale having been only for P10,000.00, instead of P12,000.00 as agreed upon, said
difference to be borne by the supposed vendee who failed to take delivery and/or to pay the price.

G.R. No. 23769


September 16, 1925
SONG FO & COMPANY, plaintiff-appellee,
vs.
HAWAIIAN PHILIPPINE CO., defendant-appellant.
The contract of the parties is in writing.
Messrs. SONG FO AND CO.
Iloilo, Iloilo.
DEAR SIRS: Confirming our conversation we had today with your Mr. Song Fo, who visited this
Central, we wish to state as follows:
He agreed to the delivery of 300,000 gallons of molasses at the same price as last year under
the same condition, and the same to start after the completion of our grinding season. He
requested if possible to let you have molasses during January, February and March or in other
words, while we are grinding, and we agreed with him that we would to the best of our ability,
altho we are somewhat handicapped. But we believe we can let you have 25,000 gallons during
each of the milling months, altho it interfere with the shipping of our own and planters sugars to
Iloilo. Mr. Song Fo also asked if we could supply him with another 100,000 gallons of
molasses, and we stated we believe that this is possible and will do our best to let you have
these extra 100,000 gallons during the next year the same to be taken by you before
November 1st, 1923, along with the 300,000, making 400,000 gallons in all.
Regarding the payment for our molasses, Mr. Song Fo gave us to understand that you would pay
us at the end of each month for molasses delivered to you.
Hoping that this is satisfactory and awaiting your answer regarding this matter, we remain.

Yours very truly,


HAWAIIAN-PHILIPPINE COMPANY
BY R. C. PITCAIRN
Administrator

Song Fo& Company filed an action for breach of contract against the Hawaiian-Philippine Co.,
defendant, in which judgment was asked for P70,369.50, with legal interest, and costs. In an amended
answer and cross-complaint, the defendant set up the special defense that since the plaintiff had defaulted
in the payment for the molasses delivered to it by the defendant under the contract between the parties,
the latter was compelled to cancel and rescind the said contract.The judgment of the trial court
condemned the defendant to pay to the plaintiff a total of P35,317.93, with legal interest from the date of
the presentation of the complaint, and with costs.
Issues:

1. Did the defendant agree to sell to the plaintiff 400,000 gallons of molasses or 300,000 gallons of
molasses? 300,000
2. Did the Hawaiian-Philippine Co. hadthe right to rescind the contract of sale made with Song Fo&
Company? NO
Held:
1. Based from the contract, the Hawaiian-Philippine Co. agreed to deliver to Song Fo& Company 300,000
gallons of molasses. The Hawaiian-Philippine Co. also believed it possible to accommodate Song Fo&
Company by supplying the latter company with an extra 100,000 gallons. But the language used with
reference to the additional 100,000 gallons was not a definite promise. Still less did it constitute an
obligation.
2. In the same letter, the plaintiff wrote, "Regarding the payment for our molasses, Mr. Song Fo (Mr. Song
Heng) gave us to understand that you would pay us at the end of each month for molasses delivered to
you."
Resolving such ambiguity as exists and having in mind ordinary business practice, a reasonable deduction
is that Song Fo& Company was to pay the Hawaiian-Philippine Co. upon presentation of accounts
at the end of each month. Under this hypothesis, Song Fo& Company should have paid for the molasses
delivered in December, 1922, and for which accounts were received by it on January 5, 1923, not later
than January 31 of that year. Instead, payment was not made until February 20, 1923. All the rest of the
molasses was paid for either on time or ahead of time.
The terms of payment fixed by the parties are controlling. The time of payment stipulated for in the
contract should be treated as of the essence of the contract. Theoretically, agreeable to certain conditions
which could easily be imagined, the Hawaiian-Philippine Co. would have had the right to rescind the
contract because of the breach of Song Fo& Company. But actually, there is here present no outstanding
fact which would legally sanction the rescission of the contract by the Hawaiian-Philippine Co.
The general rule is that rescission will not be permitted for a slight or casual breach of the contract, but
only for such breaches as are so substantial and fundamental as to defeat the object of the parties in
making the agreement. A delay in payment for a small quantity of molasses for some twenty days is not
such a violation of an essential condition of the contract was warrants rescission for non-performance.
Not only this, but the Hawaiian-Philippine Co. waived this condition when it arose by accepting payment
of the overdue accounts and continuing with the contract.

Gerardinovs CA (ARJAY)
EN BANC
G.R. No. L-36083 September 5, 1975

RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses RAMON DOROMAL, JR., and
GAUDELIA VEGA,
vs.
HON. COURT OF APPEALS and FILOMENA JAVELLANA,
FACTS:
Lot 3504 of the cadastral survey of Iloilo, situated in the poblacion of La Paz, one of its districts, with an
area of a little more than 2-1/2 hectares was originally decreed in the name of the late Justice Antonio
Horilleno, in 1916, under OCT 1314. Before he died, he executed a last will and testament attesting to the
fact that it was a co-ownership between himself and his brothers and sisters. The truth was that the owners
or better stated, the co-owners were, besides Justice Horilleno, Luis, Soledad, Fe, Rosita, Carlos and
Esperanza, all surnamed Horilleno, in the proportion of 1/7 undivided ownership each. Since Esperanza
had already died, she was succeeded by her only daughter, FilomenaJavellana. The rest of the co-owners
wanted to sell their shares or if Javellana will agree, to sell the entire property. They hired an acquaintance
Cresencia Harder, to look for buyers, and the latter came to the interest of Ramon Doromal, Sr. and Jr. In
preparation for the execution of the sale (since the brothers and sisters Horilleno were scattered in various
parts of the country: Carlos in Ilocos Sur, Mary in Baguio, Soledad and Fe, in Mandaluyong, Rizal, and
Rosita in Basilan City), the Horillenos executed various powers of attorney in favor of their niece, Mary
H. Jimenez. They also caused preparation of a power of attorney of identical tenor for signature by
Javellana, and sent it with a letter of Carlos, dated 18 January 1968 unto her thru Mrs. Harder. Carlos
informed Javellana that the price was P4.00 a square meter. It appears, however, that as early as 22
October, 1967, Carlos had received in check as earnest money from Ramon Doromal, Jr., the sum of
P5,000.00 and the price therein agreed upon was P5.00 a square meter. At any rate, Javellana, not being
agreeable, did not sign the power of attorney, and the rest of the co-owners went ahead with their sale of
their 6/7. Carlos saw to it that the deed of sale prepared by their common attorney in fact, Mary H.
Jimenez, be signed and ratified. The Deed was signed and ratified in Candon, Ilocos Sur, on 15 January
1968, and was brought to Iloilo by Carlos in the same month. The Register of Deeds of Iloilo refused to
register right away, since the original registered owner, Justice Antonio Horilleno was already dead.
Carlos had to hire Atty. TeotimoArandela to file a petition within the cadastral case, on 26 February 1968,
for the purpose. After which, Carlos returned to Luzon. After compliance with the requisites of
publication, hearing and notice, the petition was approved. On 29 April 1968, Carlos (in Iloilo) went to
the Register of Deeds and caused the registration of the order of the cadastral court approving the
issuance of a new title in the name of the co-owners, as well as of the deed of sale to the Doromals, as a
result of which on that same date, a new title was issued, in the name of the Horillenos to 6/7 and
Javellana to 1/7, Exh. D, only to be cancelled on the same day under already in the names of the vendees
Doromals for 6/7 and to Javellana, 1/7. On 30 April 1968, the Doromals paid Carlos the sum of
P97,000.00 by a check of the Chartered Bank which was later substituted by check of PNB, because there
was no Chartered Bank Branch in Ilocos Sur. Besides the amount paid in check, the Doromals according
to their evidence still paid an additional amount in cash of P18,250.00 since the agreed price was P5.00 a
square meter; and thus was consummated the transaction.
On 10 June 1968, Atty. Arturo H. Villanueva (Javellanas lawyer) arrived at the residence of the Doromals
in Dumangas, Iloilo, bringing with him her letter of that date, making a formal offer to repurchase or
redeem the 6/7 undivided share in Lot No. 3504, of the Iloilo Cadastre, which the Doromals bought from
her erstwhile co-owners, the Horillenos, for the sum of P30,000.00 (the sum Atty. Villanueva has with
him which he would deliver to the Doromals as soon as they execute the contract of sale in her favor).
The Doromals refused. On 11 June, 1968, Javellana filed the case before the CFI Iloilo seeking to
exercise her right to redeem the share of the property, as co-owner, at the price stated in the deed of sale,
i.e. P30,000.00. The trial judge, after hearing the evidence, ruled in favor of the Doromals, holding that
Javellana had no more right, to redeem as she was already informed of the intended sale of the 6/7 share
belonging to the Horillenos, and further condemned Javellana to pay attorneys fees, and moral and
exemplary damages. Javellana appealed. The Court of Appeals (in CA-GR 47945-R) reversed the trial

courts decision and held that although respondent Javellana was informed of her co-owners proposal to
sell the land in question to the Doromals she was, however, never notified least of all, in writing, of the
actual execution and registration of the corresponding deed of sale, hence, Javellana s right to redeem
had not yet expired at the time she made her offer for that purpose thru her letter of 10 June 1968
delivered to the Doromals on even date. The intermediate court further held that the redemption price to
be paid by Javellana should be that stated in the deed of sale which is P30,000 notwithstanding that the
preponderance of the evidence proves that the actual price paid by the Doromals was P115,250. The
Doromals appealed. The Supreme Court affirmed the decision of the Court of Appeals, with costs against
Spouses Doromal Sr. and Doromal Jr.
Issues:
1. 5,000 considered as earnest money?
2. Notice for Legal Redemption
3. Redemption Price? According to contract or actual price paid?
Ruling:
Issue 1:
While P5,000 might have indeed been paid to one of the co-owners, there is nothing to show that the
same was in the concept of the earnest money contemplated in Article 1482 of the Civil Code as
signifying perfection of the sale. Viewed in the backdrop of the factual milieu thereof extant in the record,
the said P5,000 were paid in the concept of earnest money as the term was understood under the Old Civil
Code, that is, as a guarantee that the buyer would not back out, considering that it is not clear that there
was already definite agreement as to the price then and that the vendees were decided to buy 6/7 only of
the property should one of the co-owners refuse to agree to part with her 1/7 share.
Issue 2: Legal Redemption
For purposes of the co-owners right of redemption granted by Article 1620 of the Civil Code, the notice
in writing which Article 1623 requires to be made to the other co-owners and from receipt of which the
30-day period to redeem should be counted is a notice not only of a perfected sale but of the actual
execution and delivery of the deed of sale. This is implied from the latter portion of Article 1623 which
requires that before a register of deeds can record a sale by a co-owner, there must be presented to him an
affidavit to the effect that the notice of the sale had been sent in writing to the other co-owners. A sale
may not be presented to the register of deeds for registration unless it be in the form of a duly executed
public instrument. Moreover, the law prefers that all the terms and conditions of the sale should be
definite and in writing.
Article 1619 of the Civil Code bestows unto a co-owner the right to redeem and to be subrogated under
the same terms and conditions stipulated in the contract, and to avoid any controversy as to the terms and
conditions under which the right to redeem may be exercised, it is best that the period therefor should not
be deemed to have commenced unless the notice of the disposition is made after the formal deed of
disposal has been duly executed.
Issue 3: Redemption Price
The trial court found that the consideration of P30,000 only was placed in the deed of sale to
minimize the payment of the registration fees, stamps and sales tax. With this undisputed fact in mind, it
is impossible for the Supreme Court to sanction the vendees pragmatic but immoral posture. Being
patently violative of public policy and injurious to public interest, the seemingly wide practice of
understating considerations of transactions for the purpose of evading taxes and fees due to the
government must be condemned and all parties guilty thereof must be made to suffer the consequences of
their ill-advised agreement to defraud the state. The co-owners who sold the property are in pari-delicto
with the vendees in committing tax evasion and should not receive any consideration from any court in

respect to the money paid for the sale in dispute. Their situation is similar to that of parties to an illegal
contract.
The redemption should be only for the price stipulated in the deed. (1) The redemptioner right is to be
subrogated upon the same terms and conditions stipulated in the contract. The stipulation in the public
evidence of the contract, made public by both vendors and vendees is that the price was P30,000; (2) If
the price paid is grossly excessive redemptioner is required to pay only a reasonable one; (3) If the
vendees had only complied with the law, they would have been obligated to accept the redemption money
of only P30,000 and if it be argued that the solution would mean unjust enrichment for the co-owner who
seeks redemption, it need only be remembered that her right is not contractual, but a mere legal one, the
exercise of a right granted by the law, and the law is definite that she can subrogate herself in place of the
buyer, upon the same terms and conditions stipulated in the contract, in the words of Article 1619, and
the price stipulated in the contract was P30,000.
G.R. No. 158377August 13, 2010
Heirs of Jose Reyes Jr vsAmanda Reyes
Justice Bersamin
FACTS
Antonio Reyes and his wife, Leoncia Mag-isa Reyes (Leoncia), were owners of a parcel of residential
land located in Pulilan, Bulacan. On that land they constructed their dwelling. The couple had four
children, namely: Jose Reyes, Sr. (Jose, Sr.), Teofilo Reyes (Teofilo), Jose Reyes, Jr. (Jose, Jr.) and
Potenciana Reyes-Valenzuela (Potenciana). Antonio Reyes died intestate, and was survived by Leoncia
and their three sons, Potenciana having predeceased her father. Potenciana also died intestate, survived by
her children, namely: Gloria ReyesValenzuela, Maria Reyes Valenzuela, and Alfredo Reyes Valenzuela.
Jose, Jr., and his family resided in the house of the parents, but Teofilo constructed on the property his
own house, where he and his family resided.
Leoncia and her three sons executed a deedKasulatan ng BilingMabibilingMuli whereby they sold the
land and its improvements to the Spouses Francia for P500, subject to the vendors right to repurchase for
the same amount saorasnasila'ymakinabang.
Nonetheless, Teofilo and Jose, Jr. and their respective families remained in possession of the property and
paid the realty taxes thereon. Leoncia and her children did not repay the amount of P500.00.
Alejandro Reyes (Alejandro), the son of Jose, Sr., first partially paid to the Spouses Francia the amount
of P265.00 for the obligation of Leoncia, his uncles and his father. Alejandro later paid the balance of
P235.00. Alejandro Reyes acquired ownership of the property by virtue of the deed Pagsasa-ayos ng
Pag-aari at Pagsasalinexecuted on August 11, 1970 by the heirs of the Spouses Francia; that on the basis
of such deed of assignment, Alejandro had consolidated his ownership of the property via his Kasulatan
ng Pagmeme-ari; and that under the MagkasanibnaSalaysay, Alejandro had granted to Leoncia, his father
Jose, Sr., and his uncles, Teofilo and Jose, Jr. the right to repurchase the property, but they had failed to do
so.
Alejandro died intestate. So Amanda Reyes, Alejandros wife, asked the heirs of Teofilo and Jose, Jr., to
vacate the property because she and her children already needed it. Amandas demand was not complied
with. So filed a case for quieting of title and reconveyance in the RTC. In their defense, the Heirs of

Reyes averred that the Kasulatan ng BilingMabibilingMuli (KBMM)was an equitable mortgage, not a
pacto de retro sale, thus the mortgagors had retained ownership of the property.
The RTC ruled in favor of Amanda and rendered a decision declaring that Alejandro had acquired
ownership of the property in 1965 by operation of law upon the failure of the petitioners predecessors to
repurchase the property as provided in the KBMM.
The CA reversed the RTC. the CA ruled that the transaction covered by the KBMM was not a pacto de
retro sale but an equitable mortgage under Article 1602 of the Civil Code; that even after the deeds
execution, Leoncia, Teofilo, Jose, Jr. and their families had remained in possession of the property and
continued paying realty taxes for the property; that the purported vendees had not declared the property
for taxation purposes under their own names; and that such circumstances proved that the parties
envisaged an equitable mortgage in the KBMM.
But they were barred from claiming the true nature of the deed for their failure to file an action for the
reformation of the KBMM to reflect the true intention of the parties within ten years from the deeds
execution on July 9, 1955, pursuant to Article 1144 of the Civil Code. Nor did the
MagkakalakipnaSalaysay effectively extend the period for Leoncia and her children to repurchase the
property, considering that the period to repurchase had long lapsed by the time the agreement to extend it
was executed on October 17, 1970.
ISSUE
1. Whether or not the KBMM is a pacto de retro sale.
2. Whether or not the Heirs of Reyes are barred to raise the true nature of the KBMM on the ground
of prescription.
3. Nature of the MagkakalakipnaSalaysay
HELD
1. No.
The CA correctly concluded that the true agreement of the parties vis--vis the Kasulatan ng
BilingMabibilingMuli was an equitable mortgage, not a pacto de retro sale. There was no dispute
that the purported vendors had continued in the possession of the property even after the
execution of the agreement; and that the property had remained declared for taxation purposes
under Leoncias name, with the realty taxes due being paid by Leoncia, despite the execution of
the agreement. Such established circumstances are among the badges of an equitable mortgage
enumerated in Article 1602, paragraphs 2 and 5 of the Civil Code, to wit:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:x x x(2) When the vendor
remains in possession as lessee or otherwise;x x x(5) When the vendor binds himself to pay the taxes on the thing sold;x x x

The existence of any one of the conditions enumerated under Article 1602 of the Civil Code, not
a concurrence of all or of a majority thereof, suffices to give rise to the presumption that the
contract is an equitable mortgage. Consequently, the contract between the vendors and vendees
(Spouses Francia) was an equitable mortgage.

2. No.
Considering saorasnasilaymakinabang, the period of redemption stated in the Kasulatan ng
BilingMabibilingMuli, signified that no definite period had been stated, the period to redeem
should be ten years from the execution of the contract, pursuant to Articles 1142 and 1144 of the
Civil Code.[25] Thus, the full redemption price should have been paid by July 9, 1955; and upon
the expiration of said 10-year period, mortgagees Spouses Francia or their heirs should have
foreclosed the mortgage, but they did not do so. Instead, they accepted Alejandros payments, until
the debt was fully satisfied by August 11, 1970.
The acceptance of the payments even beyond the 10-year period of redemption estopped the
mortgagees heirs from insisting that the period to redeem the property had already expired. Their
actions impliedly recognized the continued existence of the equitable mortgage. The conduct of
the original parties as well as of their successors-in-interest manifested that the parties to the
Kasulatan ng BilingMabibilingMuli really intended their transaction to be an equitable mortgage,
not a pacto de retro sale.
3. Nature of the MakakalakipnaSalaysay
The provisions of the Civil Code governing equitable mortgages disguised as sale contracts, like
the one herein, are primarily designed to curtail the evils brought about by contracts of sale with
right to repurchase, particularly the circumvention of the usury law and pactumcommissorium.
Courts have taken judicial notice of the well-known fact that contracts of sale with right to
repurchase have been frequently resorted to in order to conceal the true nature of a contract, that
is, a loan secured by a mortgage. It is a reality that grave financial distress renders persons hardpressed to meet even their basic needs or to respond to an emergency, leaving no choice to them
but to sign deeds of absolute sale of property or deeds of sale with pacto de retro if only to obtain
the much-needed loan from unscrupulous money lenders. This reality precisely explains why the
pertinent provision of the Civil Code includes a peculiar rule concerning the period of
redemption, to wit:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:x x x(3)When upon or after the
expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; x xx

Ostensibly, the law allows a new period of redemption to be agreed upon or granted even after the
expiration of the equitable mortgagors right to repurchase, and treats such extension as one of the
indicators that the true agreement between the parties is an equitable mortgage, not a sale with
right to repurchase. It was indubitable, therefore, that the MagkasanibnaSalaysay effectively
afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a fresh period within which to pay to
Alejandro the redemption price of P500.00.

Cebu State College vsMisterio (LEAN)


FACTS:
The late Asuncion Sadaya, mother of herein respondents, executed a Deed of Sale covering a parcel of
land in favor of Sudlon Agricultural High School (SAHS). The sale was subject to the right of the vendor
to repurchase the property after SAHS shall have ceased to exist, or shall have transferred its school site
elsewhere.
Batas Pambansa (BP) Blg. 412, entitled "An Act Converting the Cebu School of Arts and Trades in Cebu
City into a Chartered College to be Known as the Cebu State College of Science and Technology,
Expanding its Jurisdiction and Curricular Programs" took effect. It incorporated and consolidated several
schools in the Province of Cebu, including the SAITS, as part of the Cebu State College of Science and
Technology (CSCST). The law also transferred all personnel, properties, including buildings, sites, and
improvements, records, obligations, monies and appropriations of SAITS to the CSCST. SAHS was
merged with the Cebu State College, effective June1983. In 1990, the heirs of Asuncion sought to
exercise their right to redeem, claiming that school has ceased to exist. Thus, the right to repurchase the
subject property became operative.10cralawlawlibrary

ISSUE:
Whether or not the heirs of Asuncion may still exercise their right to redeem the property

HELD:
NO. In cases of conventional redemption when the vendor a retro reserves the right to repurchase the
property sold, the parties to the sale must observe the parameters set forth by Article 1606 of the New
Civil Code, which states:
Art. 1606. The right referred to in Article 1601, in the absence of an express agreement,
shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from the
time final judgment was rendered in a civil action on the basis that the contract was a true
sale with right to repurchase. (Emphasis supplied)
Thus, depending on whether the parties have agreed upon a specific period within which the vendor a
retro may exercise his right to repurchase, the property subject of the sale may be redeemed only within
the limits prescribed by the aforequoted provision.

In the Decision dated June 23, 2005, this Court ruled that since, petitioner and respondents in this case did
not agree on any period for the exercise of the right to repurchase the property herein, respondents may
use said right within four (4) years from the happening of the allocated conditions contained in their Deed
of Sale: (a) the cessation of the existence of the SAHS, or (b) the transfer of the school to other site.28
However, due to respondents' failure to exercise their right to redeem the property within the required
four (4) years from the time when SAHS had ceased to exist, or from June 10, 1983, the date of
effectivity of BP Blg. 412, this Court held that respondents are barred by prescription.
Despite this, respondents nevertheless insist on the redemption of the subject property pursuant to the
second suspensive condition, namely, petitioner's transfer of its school site. Applicable law and
jurisprudence, however, runs contrary to respondents' stance.
Article 1606 expressly provides that in the absence of an agreement as to the period within which the
vendor a retro may exercise his right to repurchase, the same must be done within four (4) years from the
execution of the contract. In the event the contract specifies a period, the same cannot exceed ten (10)
years. Thus, whether it be for a period of four (4) or ten (10) years, this Court consistently implements the
law and limits the period within which the right to repurchase may be exercised, adamantly striking down
as illicit stipulations providing for an unlimited right to repurchase. Indubitably, it would be rather absurd
to permit respondents to repurchase the subject property upon the occurrence of the second suspensive
condition, particularly, the relocation of SAHS on October 3, 1997, the time when petitioner ceded the
property to the Province of Cebu, which is nearly forty-one (41) years after the execution of the Deed of
Sale on December 31, 1956. This Court must, therefore, place it upon itself to suppress these kinds of
attempts in keeping with the fundamentally accepted principles of law.